Sergey Nivens - Fotolia
When looking for new HRMS software, it may be tempting to look for a tool that comes with all the bells and whistles. However, buying the right size HRMS software for your company is crucial because it aligns the vendor's target market with your organization. There are many reasons this is important, but at a high level it has to do with cost and complexity of managing the system.
The HRMS tools geared toward smaller organizations may not offer the same flexibility and features as those targeted at large organizations, but they may allow you to manage the systems on the budget and skillsets you already have. There is a trade-off between nice to have features and affordability.
There are several important reasons to buy the right size HRMS software for your company, especially when it involves buying a tool that may be beyond your means:
1. Licensing fees: Software intended for large corporations will often have a larger price tag because their target market can afford it and the vendor has included functionality beyond that of vendors targeting smaller customers. The additional features may be nice to have, but they may exceed your needs and your company's ability to incorporate them into your culture and existing processes. The budget required to implement all the features you require may be too costly for your organization. Licensing fees represent an ongoing cost and are an important consideration when acquiring new software.
2. Implementation and consulting fees: In addition to higher licensing fees, you may find that the implementation fees are more costly than a vendor who caters to smaller organizations. If you need help from the vendor's consultants to implement new features post go-live, the hourly rate may be a limiting factor. You may put yourself in a situation where you are stuck with reduced functionality or implementation issues because it costs too much to fix them.
3. Cost of acquiring new functionality: To truly leverage the investment you've made in your HRMS, it is ideal to implement new functionality over time so you can continue to automate your manual processes and benefit from the HRMS software you've acquired. To enable the new functionality, you may be required to license a new module or pay an additional fee. If the HRMS software is targeted at large organizations, the cost of licensing the new functionality may be prohibitive.
When evaluating HRMS software, consider the cost of implementing new modules and features post go-live. If you are using your whole budget to make the initial purchase and implementation, it may be difficult to allocate money to expand upon the initial configuration.
4. Complexity of managing the HMRS software: A potential benefit of more expensive software is the flexibility it provides when it comes to configuring the system to meet your needs and accommodate your company's processes. However, this flexibility may also increase the complexity of managing the software. For example, allowing you to completely customize a feature, such as performance management, has its benefits but also comes with a need to understand the implications of all the settings available. To undertake this customization, you may need significant training and technical experience. If your team doesn't have the technical background, you may be forced to train someone or hire external consultants at an hourly rate beyond your budget, which can limit the functionality you can implement.
5. Vendor attention: While vendors strive to provide support to all customers, they often work more closely with larger customers who are able to implement multiple modules and leverage the software's capabilities without the challenges of limited budgets. As a small company, your ability to influence feature development or escalate issues may carry significantly less weight than a large customer.
6. Vendor's policies: Beyond the desire to purchase software targeted at larger organizations, you may also be limited by a vendor's policy that specifies a minimum-sized client based on the number of employees. Some vendors prefer to sell to customers in their target market to ensure a client's experience with their software is not limited by the client's ability to pay for needed consulting or new features.
It is not surprising that HRMS software developed for and targeted toward large organizations will often have more functionality and provide greater opportunity to customize the solution. The thought of being able to develop a truly world class tool may tempt you into ignoring the reality of budgets and skillset. However, advanced functionality will likely come at a cost that may be difficult for smaller companies to afford. Other issues may arise, such as the limited ability to take advantage of the advanced functionality because of a lack of required skillset or internal support required to undertake a large HRMS project.